Not long ago, the Federal Reserve completed its stress tests on the country’s largest banks, with many firms announcing large dividend increases later. The Fed’s stress tests look at how well these major financial institutions can withstand a recession. These tests were a response to the Great Financial Crisis, which made it clear that bank failures could have systemic negative effects on the economy as a whole.
The Fed’s 2026 stress test analyzed the effects a major recession would have on 32 banks. All 32 passed the test, indicating that their assets would be sufficient to cover loan losses in the worst economic scenario. On this basis, several banks continued to increase their dividends, as they had more money to give to shareholders.
The common equity tier 1 (CET1) ratio is the main metric tested. The score needs to stay above the minimum requirement of 4.5% to pass the exam. By doing so, the bank demonstrates that it has the necessary capital to absorb large loan losses.
After passing the tests, these three banking giants plan to add juice to their profits.
Goldman Plans to Continue Strong Dividend Growth
First is The Goldman Sachs Group NYSE: GS. During the forecast period, Goldman’s CET1 ratio started at 14.3% and fell to 11.4%, easily surpassing the 4.5% bar.
Goldman Sachs Group Today
Goldman Sachs Group
- 52 week interval
- $691.30
▼
$1,125.00
- Dividend Yield
- 1.78%
- The P/E ratio
- 18.50
- Target Value
- $974.18
In response, the company said it “intends” to increase its common dividend from $4.50 to $5 per share. It says “intended” because the increase isn’t legal until it’s approved at the next Board of Directors meeting—but since the stress test results are already in, that approval is mostly legal. Since the dividend is not yet official, the record and payment dates are not yet known.
Currently, Goldman’s yield is close to 1.8%. After the planned increase, the stock’s implied yield will rise to about 2%. Excluding these planned increases, Goldman has grown its dividend by 22.87% annually over the past five years.
Overall, Goldman has demonstrated its ability to hold up during the recession while delivering strong and fast-growing returns to investors.
Wells Fargo Plans More Than 10% Profit Increase When Passes Fed Test
Wells Fargo & Company NYSE: WFC and demonstrated its ability to withstand the Great Depression during the Fed’s stress tests. During the test, the company’s CET1 ratio started at 10.6% and fell to 9.2%, remaining above the required threshold.
Wells Fargo & Company Today
Wells Fargo & Company
- 52 week interval
- $72.78
▼
$97.76
- Dividend Yield
- 2.13%
- The P/E ratio
- 13.01
- Target Value
- $98.34
Like Goldman, Wells Fargo announced that it “expects” to increase its dividend. During Q3 2026, the company plans to increase its earnings from 45 cents to 50 cents per share, or an increase of 11%.
Currently, Wells Fargo’s implied yield is approximately 2.15%. After the expected increase, that number will rise significantly to just under 2.4%.
Excluding these planned increases, its five-year dividend growth rate stands at 6.86%. This number is very good, considering that the company has significantly reduced the dividend in 2020 to 10 cents. However, since then, its profits have increased significantly.
According to the Fed’s assessment, Wells Fargo is in a strong position to weather the worst of a recession. Meanwhile, the company offers a reasonable dividend yield, combined with dividend growth.
Citigroup Plans Big Dividend Increase, Yield to Close to 2%
Last but not least is Citigroup NYSE: C. The company started the stress test period with a CET1 ratio of 13.2%. During the test, its average dropped to 10.3%, well above the minimum of 4.5%. Now, Citigroup plans to raise its dividend by 12% from 60 cents per share to 67 cents per share.
Citigroup Today
Citigroup
- 52 week interval
- $85.46
▼
$147.96
- Dividend Yield
- 1.73%
- The P/E ratio
- 17.19
- Target Value
- $139.62
It paid a dividend of $2.40 per share last time and an annual yield of 1.7%. The company’s planned dividend increase will bring the figure to just under 1.9%.
Notably, Citi has grown its dividends at a very modest rate in recent years. The company’s five-year dividend growth rate is only 2.61%, excluding this planned increase. This comes as in more than four years from 2019 to 2023, Citi did not increase its dividends at all. However, Citi has been turning its business around, with the company posting revenue across its five major divisions by 2025.
This has allowed the company to return to dividend increases recently.
Citi’s strong performance during the Fed’s stress tests indicates a level of financial stability, giving it the ability to continue to return significant capital.
Analysts Forecast Profits at Wells Fargo After Weak Performance
Overall, Goldman, Wells Fargo, and Citigroup all easily passed the Fed’s stress test, staying above the minimum requirement. Despite the cash return, Wall Street analysts are predicting the biggest rise for Wells Fargo among this group. The MarketBeat consensus price on Wells Fargo sits near $98, implying gains of more than 15%.
This comes on the heels of Wells Fargo’s lackluster performance, while Goldman and Citigroup have already continued strong runs. Since the beginning of 2025, Citigroup is up more than 100%, Goldman is up more than 75%, and Wells Fargo’s return is less than 30%.
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